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Written by Joachim Willms [Managing Director]   

What is Carbon Offsetting?

Wikipedia, the free encyclopedia, may provide an answer:

'Carbon offset is the act of paying someone else for reducing ("offsetting") their greenhouse gas emissions, when one is unable or unwilling to reduce one's own emissions. A well-known example is the planting of trees to compensate for the greenhouse gas emissions from personal air travel.

The idea of paying for emission-reductions elsewhere instead of reducing by own actions is also known from the closely related concept of emissions trading, but while emissions trading is mostly in a strict formal and legal framework, carbon offsets generally refer to voluntary acts, often arranged by a commercial carbon offset provider.

A wide variety of offset methods are in use — while tree planting has initially been a mainstay of carbon offsetting, renewable energy and energy conservation offsets have now become increasingly popular, and purchase and withdrawal of emissions trading credits is also seen. These projects are generally termed "emissions reductions projects" or "carbon projects."

Carbon offsetting as part of a "carbon neutral" lifestyle has gained some appeal and momentum mainly among consumers in western countries who have become aware and concerned about the potentially negative effects of energy-demanding lifestyles and economies on the environment. This has contributed to the increasing popularity of voluntary offsets among private individuals and also companies. Offsets may be cheaper or more convenient alternatives to reducing one's own fossil-fuel consumption. However, some critics object to carbon offsets, and many have questioned the benefits of certain types of offsets (such as tree planting), and other projects.'

Types of offset

Tree Planting

Tree planting includes not only re-creating natural forests (reforestation) and avoiding deforestation, but also monoculture tree farming on plantations for logging, biodiesel production, or other commercial purposes. The term "reforestation" is nevertheless often applied in this context to monoculture tree farming as well as re-creating natural forests. There is also afforestation, which can produce higher carbon sequestration rates because it means establishing forests particularly on land not previously forested, for example on agricultural lands where baseline carbon levels are comparatively low.

Many forestry offset projects have been conceived and/or conducted in ways that are vulnerable to criticism, drawing their net benefits into question. Significant concern also arises over the permanence of carbon storage in trees and forests, as potential future clearing of the forest would return the stored carbon to the atmosphere.

Climate impacts

Trees sequester carbon through photosynthesis, converting carbon dioxide and water into oxygen and plant matter. Hence, forests that grow in area or density will reduce atmospheric CO2 levels. (Carbon is released if a tree or its lumber burns, but as long as the forest is able to grow back, the net result is carbon neutral.) In their 2001 assessment, the IPCC estimated the potential of biological mitigation options (mainly tree planting) is on the order of 100 Gigatonnes of Carbon (cumulative) by 2050, equivalent to about 10% to 20% of projected fossil fuel emissions during that period.[1].

However, the global cooling effect of forests from sequestration is not the only factor to be considered. For example, the planting of new forests may initially release some of the terrain's existing carbon stores into the atmosphere. Specifically, the conversion of peat bogs into oil palm plantations has allegedly made Indonesia the world's third largest producer of greenhouse gases.[2]. Compared to less vegetated lands, forests affect climate in three main ways:

  1. cooling Earth by functioning as carbon sinks
  2. cooling Earth by adding water vapor, a greenhouse gas, to the atmosphere and thereby increasing cloudiness
  3. warming Earth by absorbing a high percentage of sunlight due to the low reflectivity of forest's dark surfaces. This warming effect is large where evergreen forests (very low reflectivity) shade snow cover (very high reflectivity).

Most tree planting offset strategies to date have taken only the first effect into account. A study published in December 2005 combined all these effects and found that tropical forestation has a large net cooling effect, because of increased cloudiness and because of high tropical growth and sequestration rates.[3] Trees grow three times faster in the tropics than in temperate zones; each tree in the rainy tropics removes about 22 kilograms (50 pounds) of carbon dioxide from the atmosphere each year.[4] However, this study found little to no net global cooling from tree planting in temperate climates, where warming due to sunlight absorption by trees counteracts the global cooling effect of carbon sequestration. Furthermore, this study confirmed earlier findings that reforestation of colder regions—where long periods of snow cover, evergreen trees, and slow seqestration rates prevail—probably results in global warming.

"To plant forests outside of the tropics to mitigate climate change is a waste of time", said Ken Caldeira,[5] a study co-author from the Carnegie Institution. "To prevent climate change, we need to transform our energy system. It is only by transforming our energy system and preserving natural habitat, such as forests, that we can maintain a healthy environment. To prevent climate change, we must focus on effective strategies and not just ‘feel-good’ strategies." His study indicates that one effective strategy is well-planned and executed tree-planting in the tropics.


While the benefits of tree-planting are subject to debate, the costs are low [1]compared to many other mitigation options. The IPCC has concluded that "The mitigation costs through forestry can be quite modest (US$0.1–US$20 / metric ton carbon dioxide) in some tropical developing countries.... The costs of biological mitigation, therefore, are low compared to those of many other alternative measures".[1] The cost effectiveness of tropical reforestation is due not only to growth rate, but also to farmers from tropical developing countries who voluntarily plant and nurture tree species which can improve the productivity of their lands.[6] As little as US$90 will plant 900 trees, enough to annually remove as much carbon dioxide as is annually generated by the fossil-fuel usage of an average United States resident.[7]

Types of trees planted

Some environmentalists advocate only indigenous trees being planted, to promote the return of forests of native trees. However, the use of other species may slow erosion, return organic matter to the soil, and build up ground water. A practical solution is to plant tough, fast-growing tree species to begin rebuilding the land. Planting non-invasive trees that assist in the natural return of indigenous species is called "assisted natural regeneration." There are many such species that can be planted, of which about 12 are in widespread use, such as Leucaena leucocephala.[8]

Planting the wrong kind of trees, such as monocultures of eucalyptus where they are not native species, can devastate the lands of the local people.[9] However, it is often much more profitable to outside interests to plant non-native fast-growing trees, such as eucalyptus or pine (e.g., Pinus radiata or Pinus caribaea), even though the environmental and biodiversity benefits of such monoculture plantations are not comparable to native forest, and such offset projects are frequently objects of controversy (see below).

Avoided deforestation

Some offsets aim at carbon benefits from avoided deforestation. It may involve training developing-world communities in the production, sale, and use of fuel-efficient stoves. As almost half of the world's people burn wood (or fiber or dung) for their cooking and heating needs, fuel-efficient cook stoves can reduce fuel wood consumption by 30 to 50%, though the warming of the earth due to decreases in particulate matter (i.e. smoke) from such fuel-efficient stoves has not been addressed.[8]

Renewable energy and energy conservation

Renewable energy offsets commonly include wind power, solar power, and biofuel. Some of these offsets are used to reduce the cost-differential between renewable and conventional energy production. Others operate in developing countries, such as training local communities to produce biodiesel from jatropha oil.

Some offset providers sell in multiple markets, such as the Te Apiti Wind Farm in New Zealand, a project certified to the privately operated CDM Gold Standard which supplies offsets to the Dutch Government, British bank HSBC, and private citizens.

Methane Collection & Combustion

Some offset projects consist of combusting or containing methane generated by farm animals [10] or landfills[11]. Methane has a Global warming potential (GWP) 23 times that of CO2; when combusted, each molecule of methane is converted to one molecule of CO2, thus reducing the global warming effect by 96%. Methane can also be contained using an anaerobic digester, and used to produce electricity or heat. Landfill or wastewater methane projects are viewed as carbon projects that are especially straightforward in their proof of additionality.

Links with emission trading schemes

Carbon offsets can also be linked with official emission trading schemes, such as the European Union Emission Trading Scheme and the voluntary Chicago Climate Exchange. By purchasing emission allowances and subsequently withdrawing the allowances from the markets, a reduction of allowable emissions is forced (assuming the trading scheme works as intended). In the case of the European Union Emission Trading Scheme it is widely believed that allowable emissions (during the first phase of the system) exceed physical emissions, in which case there is no physical effect in doing so. EU emission allowances sell for 0.30 Euro per metric ton of CO2, as of May 2007.


A UK offset provider set up a carbon offsetting scheme which set up a secondary market for treadle pumps in developing countries. These pumps are used by farmers, using human power, in place of diesel pumps. [12] However, given that treadle pumps are best suited to pumping shallow water, while diesel pumps are usually used to pump water from deep boreholes, it is not clear that the treadle pumps are actually achieving real emissions reductions. Other companies have explored and rejected treadle pumps as a viable carbon offsetting approach due to these concerns.

Accounting for and verifying reductions

Due to their indirect nature, many types of offset are difficult to verify. Some providers obtain independent certification that their offsets are accurately measured, to distance themselves from potentially fraudulent competitors. The credibility of the various certification providers is often questioned. Certified offsets may be purchased from commercial or non-profit organizations for US$1–30 per tonne of CO2,[13] due to constant flucuations with the current market price. Annual carbon dioxide emissions in developed countries range from 6 to 23 tons per capita.[7]

Accounting systems differ on what constitutes a valid offset for voluntary reduction systems and for mandatory reduction systems. Formal standards for quantification of offsets are not in place; differences of opinion between emitters, regulators, environmentalists, and project developers have yet to be resolved.

Accounting of offsets may address the following basic areas:

  • Baseline - What emissions would occur in the absence of a proposed project?
  • Additionality - Would the project occur anyway without the investment raised by selling carbon offset credits?
  • Redundancy - Are the reductions already required by some other law or regulation?
  • Permanence - Are some benefits of the reductions reversible? (for example, cutting trees to burn the wood. Related question: does growing trees for fuel wood decrease the need for fossil fuel?) If woodlands are increasing in area or density, then carbon is being sequestered. After roughly 50 years, newly planted forests will reach maturity and remove carbon dioxide more slowly.
  • Leakage - Does implementing the project cause higher emissions outside the project boundary?


Some disagree with the principle of carbon offsets. George Monbiot, an English environmentalist and writer, has compared carbon offsets to the practice of purchasing Indulgences during the Middle Ages, whereby people believed they could purchase forgiveness for their sins (instead of actually repenting and not sinning anymore). Monbiot also says that carbon offsets are an excuse for business as usual with regards to pollution.[14]

There are also concerns that using carbon offsets actually increases demand for polluting sources of power since overall power consumption is not being reduced.[15]


In Ecuador, the Dutch FACE Foundation has an offset project in the Andean Páramo involving 22,000 hectares of eucalyptus and pine planted, of which 20,000 hectares certified under the Forest Stewardship Council system (by SGS). Following an investigation, the NGO Acción Ecológica criticised the project for destroying a valuable Páramo ecosystem by introducing exotic tree species, causing the release of much soil carbon into the atmosphere, and for harming local communities who had entered into contracts with the FACE Foundation to plant the trees.[16]

East Africa

A Norwegian firm called Tree Farms (or Fjordgløtt, as it was then called) started operations in Uganda and Tanzania (and later in Malawi). In Uganda, it obtained a very cheap 50-year lease on 5,160 hectares east of the town Jinja in the Bukaleba Forest Reserve on Lake Victoria. Tree Farms planned to plant the land mainly with eucalyptus and fast-growing pines. The project has been criticised for forcing people in five communities off their lands and paying too little rent for the land.[17]

In another project in Uganda, the aforementioned Dutch FACE Foundation in 1995 entered into an agreement with the Ugandan authorities to plant trees on 25,000 hectares inside Mount Elgon National Park. The project involves planting a two to three kilometre-wide strip of trees (including eucalyptus) just inside the 211 kilometre boundary of the National Park. The project is certified under the Forest Stewardship Council scheme as well managed. However, the project was investigated by the World Rainforest Movement who charged among others that communities had been evicted brutally from their land and that workers are paid well below subsistence rates for tending the trees.[18]

Financial Times investigation

In 2007, the Financial Times conducted an investigation of the carbon offsets industry.[19] Among the findings they reported were:

  • Widespread instances of people and organisations buying worthless credits that do not yield any reductions in carbon emissions.
  • Industrial companies profiting from doing very little – or from gaining carbon credits on the basis of efficiency gains from which they have already benefited substantially.
  • Brokers providing services of questionable or no value.
  • A shortage of verification, making it difficult for buyers to assess the true value of carbon credits.
  • Companies and individuals being charged over the odds for the private purchase of European Union carbon permits that have plummeted in value because they do not result in emissions cuts.

Cheat Neutral website

A group of activists in Machynlleth, Wales, set up a spoof website [2] to illustrate the main contradiction in offsetting practices to reduce carbon emissions: carbon trading markets make it seem acceptable to continue to generate greenhouse gases in an era of global environmental change. Therefore, they proposed a "cheating offset" program, by which someone who wants to betray his/her spouse makes a payment of 2.50 British pounds to someone who pledges to be faithful. Their key point is that offset practices legitimize the continued production of greenhouse gases, that these markets may not reduce carbon emissions, and that the measurement of the true harm of carbon emissions is difficult. Morever, offsetting practices could actually encourage producers to pollute more [3].

See also


  1. ^ a b Working Group III (July 2001). in Bert Metz: Climate Change 2001: Mitigation, World Meteorological Organization, Intergovernmental Panel on Climate Change. DOI:10.2277/0521015022. Retrieved during 2007. 
  2. ^ Delft Hydraulics (2006-07-12). PEAT-CO2: Assessment of CO2 emissions from drained peat lands in SE Asia. (PDF). Wetlands International.
  3. ^ S. G. Gibbard; K. Caldeira, G. Bala, T. Phillips, M. Wickett, Lawrence Livermore National Laboratory, Carnegie Institution of Washington (2005-10-29). "Climate effects of global land cover change". Geophysical Research Letters 32. Retrieved on 2007-02-22. 
  4. ^ Global Cooling Centers. Trees for the Future (2006).
  5. ^ Jha, Alok. "Planting trees to save planet is pointless, say ecologists", The Guardian, 2006-12-15. “To plant forests to mitigate climate change outside of the tropics is a waste of time” 
  6. ^ Providing farmers and communities in the tropics with long-term assistance implementing environmentally and economically sustainable technologies. Sustainable Harvest International.
  7. ^ a b CO2 Emissions. Environmental Indicators. United Nations Statistics Division (June 2005).
  8. ^ a b Dave Deppner; John Leary, Karin Vermilye, Steve McCrea (2005). The Global Cooling Answer Book (PDF), Second Edition, Trees for the Future. ISBN 1-879857-20-0. Retrieved during 2007. 
  9. ^ Kittisiri, Areerat (1996-06-02). Impacts of Monoculture: The Case of Eucalyptus Plantations in Thailand. Monocultures: Environmental and Social Effects and Sustainable Alternatives Conference. Southern Alternative Agriculture Network.
  10. ^ Minnesota Project
  11. ^ Draft Offset Protocol [pdf]
  12. ^ http://news.independent.co.uk/environment/article2124817.ece
  13. ^ Carbon Emissions Offset Directory. EcoBusinessLinks (2007).
  14. ^ "The trade in carbon offsets is an excuse for business as usual" by George Monbiot, The Guardian, October 18, 2006. A reprint of the article may be accessed at on Monbiot's website. Also see "Carbon Offset Business Takes Root" by Martin Kaste, NPR, Nov. 28, 2006.
  15. ^ Cutting carbon, The Economist.com, accessed Feb. 28, 2007; A tale of two markets The Economist.com, accessed March 1, 2007.
  16. ^ Acción Ecológica Ecuador (May 2005). Carbon Sink Plantations in the Ecuadorian Andes: Impacts of the Dutch FACE-PROFAFOR monoculture tree plantations project on indigenous and peasant communities (PDF). World Rainforest Movement.
  17. ^ Lohmann, Larry (September 2006). "Carbon Trading: A critical conversation on climate change, privatisation and power". Development Dialogue (48). Retrieved on 2007-02-22. 
  18. ^ Chris Lang; Timothy Byakola (December 2006). A funny place to store carbon: UWA-FACE Foundation’s tree planting project in Mount Elgon National Park, Uganda (PDF). World Rainforest Movement.
  19. ^ http://www.ft.com/cms/s/48e334ce-f355-11db-9845-000b5df10621.html
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